The article explains how the occupancy
rates for apartments in Dallas Fort Worth has “fallen”
to 94.3% - which means that the “vacancy rate” is now
5.7% (considered a low vacancy rate) - and coupled with a
rise of 2% in rental incomes over the past 12 months –
this is enough to trigger a massive lift in apartment
construction.

Compare this to the “Australian
housing shambles” where residential apartment vacancies
are hovering around the 1% or less (in some areas such as
Mackay rental vacancies are negative – where they are
living in caravans).

The reality is that strangled
urban markets (whether in Australia, NZ, US coastal cities
in the main and the UK) – with their grossly inflated land
prices) – do not have the capacity to respond to ever
changing market demand. It is simply not economic to respond
with increased supply. Rentals will have to inflate
substantially to increase supply – which at best will be
“muted” because of artificial land scarcities inflating
land prices further . Australia is currently a textbook
lesson in this regard. So the “destructive spiral”
continues in the artificial land scarcity markets.

This “destructive spiral” cannot be reversed until
significant land supply is made available on the urban
fringes to lower land / lot prices substantially. The urban
fringes are the “supply vent” or “inflation vent” of
an urban market.

The artificial land
supply constraints of poorly governed urban markets
globally, also fuelled much of the poor quality lending that
has occurred over recent years. US residential stock is
valued at around $33 trillion – the mortgage market some
$10.5 trillion and of this, the sub prime is about $1
trillion and what is known as the Alt A (Alternative A) or
low doc / liar loans some $2 trillion.

As
artificial land scarcities provided the foundation for the
property inflation – lenders simply threw money at the
market, as they perceived it to be “risk free”. The view
was that “defaults” would be covered by ever rising
prices. That “inflation party” stopped around March 2006
and now we are going through what could diplomatically be
described as a “correction phase”.

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